The US merchant bar market continues to see little demand for domestic and import products, and while this weak demand is expected to continue through at least the next couple of weeks, the apparent pickup in scrap prices indicates that the market may be getting closer to the bottom.
Since Nucor Bar Mill Group's announcement earlier this month that the raw materials surcharge (RMS) for merchant bars is $0.00 cwt. as a result of the Shredded Consumer Buying Price dropping below its program's $162 /nt ($8.10 cwt. or $179 /nt) baseline, recent scrap activities indicate that shredded scrap prices have already increased some. The official numbers are released at the beginning of the month and, depending how much scrap moves from now to the first week of December, there may be a raw materials surcharge again.
According to SteelOrbis' surveys, shredded scrap prices have increased by around $85 /long ton (lt) since the beginning of November and are now in the price range of approximately $210 /lt to $220 /lt. However, the scrap market is also quiet due to massive capacity cuts and slowing exports. Therefore, these price gains may only be temporary. Still, shredded scrap is expected to open December with positive gains compared to November, which will have a positive influence on merchant bar prices going forward. Another official price decrease is, therefore, not in the cards.
Since our last report two weeks ago, domestic merchant bar prices have not officially changed and are still in the range from $41.55 cwt. to $49.25 cwt. ($916 /mt to $1,086 /mt or $831 /nt to $985 /nt) ex-mill depending on size, shape, thickness, and region; however, SteelOrbis has learned from some distributors that these merchant bar prices may be negotiable depending on requested tonnage and the distributor's inventory levels.
Even though most distributors agree that the prices are close to the bottom, buyers do not appear to be in any rush to purchase significant tonnage. The risk for the buyers is not really how much lower prices could fall, but rather how their customers are faring during these unstable economic times. Many manufacturers have started to lay off personnel and are cutting production. Contractors have been postponing jobs, though most have not been canceled, yet. There is no question that the uncertainty in today's market is contributing to the weak demand for merchant bar products.
In the search for new orders, Mexico has aggressively reduced merchant bar import prices to the US by approximately $5.00 cwt. ($110 /mt or $100 /mt) since the beginning of November, and offerings are now within the range of about $36.00 cwt. to $37.00 cwt. ($794 /mt to $816 /mt or $720 /nt to $740 /nt) delivered to California and Texas.
Meanwhile, South Korean import merchant bar offerings for January shipments are around $34.00 cwt. ($740 /mt or $680 /nt) duty-paid, FOB loaded truck in West Coast ports.
Imported merchant bar price offerings from Turkey are expected to decrease this week in the aftermath of recent Turkish billet and scrap price declines this week after moderate price increases in the previous two weeks. Many distributors believe that import bookings are not worth the risk, especially considering the current global economic uncertainty. If they need to replenish their inventory, they can quickly do so from their domestic suppliers.
Census Data from the US Steel Import Monitoring and Analysis System (SIMA) show that merchant bar import arrivals have been on a steady decline since the second half of 2008. In June 2008, worldwide import tonnage to the US for merchant bar products totaled 15,978 mt. Since then, monthly merchant bar import totals have slid by almost 1,000 mt or more every month, demonstrating the following monthly totals: July - 14,973 mt; August - 11,293 mt; September - 9,647 mt; and October - 8,693 mt. The data are for light sections of carbon and alloy steel, U, I, L, T and H shapes of 3" or smaller (does not include rounds, squares, or flats).